September 14th, 2018 - Issue #936
In This Issue
1. Futures Options 201: Selling Options Rules of Thumb
2. Hot Market Report: Coffee Grinding Lower
3. Economic Calendar
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1. Selling Options Rules-of-Thumb
One of the things we pride ourselves on at Cannon Trading is being a repository for high quality articles about the industry, for traders by traders.
We scour and review many different Industry blogs, newsletters and trade related sources. Sometimes you will see the same authors reappear because of their high quality content. Today the topic is a very timely piece, especially if you consider yourself “All Thumbs “ when it comes to Futures Option trading.
Enjoy these rules of thumb from Don Singletary.
Option Trading Rules-of-Thumb
These Five Option Trading Rules-of-Thumb can help you succeed. This is a simple way to remember some major points to help you succeed. Just remember this: 25-50%, 50%, 70%, 90%, and 200% The details are listed below.
Rule of thumb. The English phrase rule of thumb refers to a principle with broad application that is not intended to be strictly accurate or reliable for every situation. It refers to an easily learned and easily applied procedure or standard, based on practical experience rather than theory.
25% to 50% Margin Utilization
Try to keep your margin requirements on your trades as no more than 25% to 50% of your account balance. Every single day your account is “marked to the market” for margin requirements, and you never know when you might need them. This is why keeping requirements down to between 25% to 50% of your account balance is almost always a prudent thing to do. Running higher than this guideline can put you into a position where you MUST exit a trade to meet margin requirements – and that can mean forced losses. If you don’t understand margin requirements and how this all works, ask your broker and get some help so you can fully understand how it works immediately. Knowing this is absolutely essential.
50% Profit Rule
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Rules of Thumb
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2. Hot Market Report: Coffee Grinding Lower
By John Thorpe, Senior BrokerClick on image below to enlarge
Coffee futures are part of the SOFTS family which includes Cocoa, Sugar, Cotton, Coffee and Orange Juice. All traded on the ICE exchange.
Weekly chart of Coffee Futures for your review from this morning ( Sept. 14th 2018). You can see that coffee has been in a nice sloping downtrend since March 2017.
Red squares, followed by red bars along with the strongest signs of down trend ( according to my poreferences...), which is the red bars marked with a red triangle above.
This chart was prepared using CQG Q Trader software, which you can demo for 14 days with realtime data.
To access a free trial to the ALGOS shown in the chart along with other tools, visit and sign up for a free trial for 21 days with real-time data.
From the fundamental perspective, Coffee prices are facing a bitter outlook, trading near a twelve-year low this week under 97 cents per pound ( front month). The market has been unable to catch a buzz due to overwhelming global supply and weak demand. The last time the exotic commodity traded below $1.00 per pound was in September of 2006 Brazil, the world’s largest coffee grower and exporter, is wrapping up a record-breaking harvest, bringing over 60 million bags (60 kilograms each) onto the market.
ICE Arabica Coffee Specs
Hours: 03:15 AM to 12:30 PM Central Time
Margins: $2310.00 initial, $2100 Maint. ( as of the date of this newsletter)
Point Value: full point = $375.00 ( Example: 100.00 to 99.00). Min fluctuation is 0.05 = $18.75 ( Example: 100.00 to 99.95) Settlement: Physical Delivery
Months: (Sep, Dec, Mar, May, July)
Some of the basic fundamentals to keep in mind when you are considering trading coffee futures:
1. Supply and Demand.
2. Brazil, Vietnam, Columbia and Indonesia are the primary producers
3. Freezes
4. Technological advances
5. the makeup of open interest thru the COT reports
6. Inflationary prospects
7. Geopolitical Stability
Our brokers here at Cannon will be happy to chat about the Coffee market, other exotic products, other futures, options, futures spreads and much more! Feel free to contact us at any time.
3. Economic Calendar
Source: Moore Research Center, Inc.
| Date | Reports | Expiration & Notice Dates |
|---|---|---|
| 09/14 Fri |
7:30 AM CDT - Export(ex-ag) & Import(ex-oil) Prices(Aug)
7:30 AM CDT - Retail Sales(Aug) 7:30 AM CDT - Retail Sales Ex-Auto(Aug) 8:15 AM CDT - Capacity Util & Industrial Prod(Aug) 9:00 AM CDT - Business Inventories(Jul) 9:00 AM CDT - Mich Sentiment-Prelim(Sep) |
LT: Sep Wheat(CBT)
Sep Corn(CBT) Sep Oats(CBT) Sep Rough Rice(CBT) Sep Soybeans,Soymeal,Soyoil(CBT) Sep Lumber(CME) Oct Cotton Options(NYM) Oct Coffee Options(ICE) |
| 09/17 Mon |
7:30 AM CDT - Empire Manufacturing(Sep)
|
FN: Sep Lumber(CME)
LT: Sep Currencies(CME) Sep Eurodollar(CME) Sep Mx Peso(CME) Sep US Dollar Index(ICE) Sep Eurodollar Options(CME) Oct Crude Lt Options(NYM) Oct Sugar-11 Options(ICE) |
| 09/18 Tue |
9:00 AM CDT - NAHB Housing Market Index(Sep)
3:00 PM CDT - Net Long-Term TIC Flows(Jul) 3:30 PM CDT - API Energy Stocks |
LT: Sep Canadian Dollar(CME)
Sep Coffee(ICE) |
| 09/19 Wed |
6:00 AM CDT - MBA Mortgage Index
7:30 AM CDT - Building Permits & Housing Starts(Aug) 7:30 AM CDT - Current Account Balance(Q2) 9:30 AM CDT - EIA Petroleum Status Report 2:00 PM CDT - Diary Products Sales 2:00 PM CDT - Milk Production |
LT: Sep 10 Year Notes(CBT)
Sep Bonds(CBT) Oct Platinum Options(NYM) Oct Palladium Options(NYM) |
| 09/20 Thu |
7:30 AM CDT - USDA Weekly Export Sales
7:30 AM CDT - Initial Claims-Weekly 7:30 AM CDT - Philadelphia Fed(Sep) 9:00 AM CDT - Existing Home Sales(Aug) 9:00 AM CDT - Leading Indicators(Aug) 9:30 AM CDT - EIA Natural Gas Report 3:30 PM CDT - Money Supply |
LT: Sep S&P 500(CME)
Oct Crude Lt(NYM) Sep S&P 500 Options(CME) |
| 09/21 Fri |
2:00 PM CDT - Cattle On Feed
|
LT: Sep E-Mini Dow(CME)
Sep E-Mini S&P 500(CME) Sep NASDAQ(CME) Sep Russell(CME) Sep E-Mini Dow Options(CME) Sep E-Mini S&P 500 Options(CME) Sep NASDAQ Options(CME) Sep Russell Options(CME) Oct 2,5,10 Year Notes Options(CBT) Oct Bonds Options(CBT) Oct Canola Options(CBT) Oct Wheat Options(CBT) Oct Corn Options(CBT) Oct Rough Rice Options(CBT) Oct Oats Options(CBT) Oct Soybeans,Soymeal,Soyoil Options(CBT) Oct Orange Juice Options(ICE) |
| 09/24 Mon |
2:00 PM CDT - Cold Storage
|
FN: Oct Cotton(NYM)
Oct Crude Lt(NYM) |
| 09/25 Tue |
8:00 AM CDT - FHFA Housing Price Index(Jul)
9:00 AM CDT - Consumer Confidence(Sep) 3:30 PM CDT - API Energy Stocks |
LT: Oct Copper Options(CMX)
Oct Gold Options(CMX) Oct Silver Options(CMX) Oct Natural Gas Options(NYM) Oct RBOB & ULSD Options(NYM) |
| 09/26 Wed |
6:00 AM CDT - MBA Mortgage Index
9:00 AM CDT - New Home Sales(Aug) 9:30 AM CDT - EIA Petroleum Status Report 1:00 PM CDT - FOMC Rate Decision 2:00 PM CDT - Dairy Products Sales |
LT: Sep Copper(CMX)
Sep Gold(CMX) Sep Silver(CMX) Sep Palladium(NYM) Sep Platinum(NYM) Oct Natural Gas(NYM) |
| 09/27 Thu |
7:30 AM CDT - USDA Weekly Export Sales
7:30 AM CDT - Initial Claims-Weekly 7:30 AM CDT - Durable Goods-Ex Transportation(Aug) 7:30 AM CDT - Durable Orders(Aug) 7:30 AM CDT - GDP-Third Estimate(Q2) 7:30 AM CDT - GDP Deflator-Third Estimate(Q2) 9:00 AM CDT - Pending Home Sales(Aug) 9:30 AM CDT - EIA Natural Gas Report 2:00 PM CDT - Hogs & Pigs 3:30 PM CDT - Money Supply |
FN: Oct Natural Gas(NYM)
LT: Sep Feeder Cattle(CME) Sep Feeder Cattle Options(CME) |
| FN=First Notice, OE=Option Expiration, LT=Last Trade | ||
* Please note that the information contained in this letter is intended for clients, prospective clients, and audiences who have a basic understanding, familiarity, and interest in the futures markets.
** The material contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results.
*** This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!
